Gold Price (XAU/USD) Outlook: More Weakening Expected as Strong NFP Supports Early Tapering

Summary:

Gold prices (XAU/USD) fell hard on Friday after strong public sector jobs numbers solidified the Fed's position on early tapering.

As predicted, gold prices fell hard after the latest jobs data proved to be a lot stronger than expected.

July’s employment change improved from 938K registered in June to 943K, beating expectations of 870K. The unemployment rate fell from 5.9% to 5.4%, beating the consensus of a drop to 5.7%.

With the strong jobs numbers, the path to tapering by the Fed is now more straightforward, allowing the greenback to gain traction on the day. Gold price (represented by the XAU/USD pair) was down 2.24% as of writing.

The Fed’s Vice Chair Richard Clarida set off a new round of tapering talk within the week, suggesting that tapering could begin as early as late 2021. Fed Governor Waller also towed the same path in separate comments, setting off a round of USD strength.

Expectations of a higher interest rate and less money being printed to pay for stimulus typically weighs on the non-yielding gold metal but props up the US Dollar as investment money chases yielding USD-denominated assets.

Technical Outlook for Gold Prices

Gold price is now testing support at 1763.30. A breakdown of this price level opens the door towards 1741.01, with 1719.13 and 1699.43 serving as additional downside targets if the correction is extensive.

On the flip side, a bounce of 1763.30 due to fresh demand allows gold price some reprieve, targeting 1789.49 and 1800.00 initially. Additional upside targets reside at 1815.20 and the 1828/1840 price wall.